Managing people

How to terminate an employee

Know your rights and learn how to terminate an employee without risking unfair dismissal, and while staying within your obligations as an employer.

Termination of employment is the voluntary or involuntary bringing to an end of a contract of employment, which may be:

  • done by giving proper notice (resignation of employee, dismissal or retrenchment by the employer)

  • summarily due to the employee’s misconduct by frustration, repudiation or abandonment of employment by an employee.

Termination of employment may be carried out by either the employer or the employee, but is subject to minimum obligations imposed by the Fair Work Act and, where relevant, the applicable industrial instrument.

As an employer or manager, you’re responsible for giving your employees their correct entitlements. It’s important you’re aware of the Fair Work Act and understand your rights and obligations when firing an employee.

When can an employee be terminated?

Completion of contract

An employment contract – for a fixed-term, or for the completion of a certain task or project – ends automatically at the end of the period, or on completion of the task or project.

By giving notice

Either party may terminate a contract of employment by giving the minimum notice period of termination. The period of notice may be subject to the National Employment Standards (in the case of notice by the employer to the employee), the applicable modern award or enterprise agreement, or the employee’s contract of employment.

Breach of contract

A party may terminate a contract of employment in some circumstances if the other party breaches the contract of employment. Not every breach of contract will justify the termination of that contract.

Whether a particular breach justifies termination will depend on the nature of the breach and the particular circumstances of the case.

Misconduct

This term is defined in the Fair Work Regulations 2009 to mean:

  • wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment, such as harassment or insubordination

  • conduct that causes the serious and imminent risk to the health and safety of a person, or the reputation, viability or profitability of the employer’s business

  • theft

  • fraud

  • assault

  • the employee being intoxicated (alcohol or drugs, other than prescribed drugs) at work

  • the employee is refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.

Section 123 of the Fair Work Act excludes an employee whose employment was terminated because of serious misconduct from the minimum notice period requirements of the Act.

The Fair Work Act introduced two separate streams where an employee can seek a remedy when an employee’s employment is terminated by the employer. General protections relate to the dismissal of an employee where an alleged breach of the Act has occurred, for example, the reason for dismissal was discriminatory, employee was a union delegate, the dismissal was due to an employee’s temporary absence due to illness or injury. The most common form of ‘adverse action’ is dismissal, although it could include demotion or being overlooked for promotion because of the employee’s legitimate activities at work.

Unfair dismissal

An employee who is seeking a remedy to unlawful termination of their employment – where the reason for termination does not fall under the general protections stream – may be able to claim under the unfair dismissal stream.

The unfair dismissal provisions of the Fair Work Act are based on the notion of a ‘fair go all round’ and are intended to prevent dismissals that:

  • are ‘harsh, unjust or unreasonable’

  • do not comply with the Small Business Fair Dismissal Code (in the case of an employer who employs fewer than 15 employees)

  • are not cases of genuine redundancy.

Free Workplace Advice line

Get free phone advice about leave entitlements or correct procedures for termination, redundancies and stand down. Our Workplace Advice Line team handles over 26,000 calls from Australian businesses every year and is here to help. 

To access your free Workplace Advice Line call, simply join Business Australia as a free member. 

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